MGMT 406 - Employee and Labor Relations
Case Analyst 2
Problems After the Tri-vesture of AT&T
March 7, 2013
Mr. Brian Martinson, Assistant Professor
What is the analysis of the situation described in the case?
The tri-vestiture of Bell Labs and AT&T’s network systems development and manufacturing business, created Lucent Technologies Inc. in 1994. Lucent Technologies designs, manufactures, and service public and private networks, communication systems and software, data networking business telephone systems, and micro-electronic equipment. While formerly Bell Labs, provides all the research and development functions for Lucent Technologies.
During the tri-vestiture spin-off, AT&T was planning to downsize 40,000 workers, to include approximately 23,000 from operations at Lucent. The first four years of growth at Lucent has been great. Management is under the belief if the downsize occur, the stock market would react favorable to this announcement and stock value would increase. Upon making their announcement of the proposed plan to downsize, a strong negative response was echo from the public sector and a negative cover story the Newsweek magazine. Therefore, the downsizing did not occur. By 1998, Lucent employed 140,000 employees worldwide, with a 100,000 in the U.S., and 45,000 of those employees were unionized, and Lucent’s revenues were in excess of $26 Billon.
Henry Schacht was Lucent’s first CEO. His vision was technology-driven, high-performance enterprise, and not like AT&T’s lumbering bureaucracy.
Lucent Technologies currently have three developments to date:
1. The creation of the new company, the values, and legacies inherited strategies of the new leadership team.
2. The organization divided into 11 business units and a new business strategy “GROWS”.
3. The company to date has a favorable working relationship among professional and managerial ranks. Lucent is forward looking at the challenges the company will face with hourly employees and the unions.
Henry Schacht conveyed to the leadership team of Lucent, they would not take any stock options from the initial IPO; instead they would wait and exercise their options when the stocks became available to all employees. This announcement was received by the workforce as an indication of the values of the company’s leadership.
Richard McGinn succeeded Schacht as CEO and Chairman in 1998. He shares the same vision and strategy as the previous CEO. The greatest challenge facing Lucent is the switch from a voice-based to data-based technologies. It is believed voice-based switching may be obsolete in the next five to ten years. Cisco Systems is Lucent’s major competitor and perceived by most experts to be far ahead in the development of this technology.
Lucent’s reorganization decision was made in October 1997 and then two